U.S. GOVERNMENT PRINTING OFFICE
BOARD OF CONTRACT APPEALS
Appeal of COLORGRAPHICS CORPORATION )
Docket No. GPO BCA 16-87
March 31, 1989
MICHAEL F. DiMARIO
Administrative Law Judge
OPINION
This appeal, timely filed by Colorgraphics Corporation, 4500
South Garnett Road, Tulsa, OK 74146 (Appellant), is from
the June 11, 1987, final decision of William E. Flood,
Contracting Officer (CO), U.S. Government Printing Office
(Respondent), rejecting Jacket No. 152-343, Purchase Order
62920, and requiring the reprinting of the product at no
additional cost to the Government. The decision of the CO
is denied.
BACKGROUND
Respondent, by Purchase Order 62920 of May 2, 1986, awarded
a GPO contract Jacket No. 152-343 to Appellant in the amount
of $36,320 to print, bind, and ship by June 30, 1986, a
certain 4-color, 32-page pamphlet entitled "Career for
Scientist and Engineers," and three related forms for the
Department of the Navy pursuant to its Requisition No.
6-20191. The Purchase Order was made in strict accordance
with Appellant's competitive bid dated April 24, 1986, and
Respondent's specifications (Rule 4 File, hereinafter "R4
File," Tab D) dated April 10, 1986, as amended by Amendment
No. 1 dated April 14, 1986, and Amendment No. 2 dated April
22, 1986. (R4 File, Tab B.) Subsequent Contract
Modifications No. 2291 and 2420 made during the course of
Appellant's performance brought the ultimate contract price
to $42,170. (R4 File, Tab E.)
The specifications in pertinent part called for the
Government to furnish Appellant camera copy mounted on art
boards together with necessary transparencies (R4 File, Tab
B, page 3) from which Appellant, supplying all other
materials and operations, was then to manufacture the
ordered products. The pamphlet itself was to be produced in
15,165 copies, of which 15,000 (R4 File, Tab B, page 4) were
to be shipped f.o.b. destination to the Naval Surface
Weapons Center (NSWC), Silver Spring, MD.
The finished pamphlet was to be 8 1/2" x 11" in size with a
wraparound cover. (R4 File, Tab B, page 3.) The paper
stocks for the cover and text were to be selected by the
Appellant from any one of certain specified stocks (R4
File, Tab B, page 6), samples of which were to be approved
by Respondent prior to the commencement of production. (R4
File, Tab B, page 5.) After printing, the cover stock
(covers 1-4) was to have its entire surface coated with a
gloss varnish or lacquer to prevent scratching and
smearing. (R4 File, Tab B, page 7.) In addition, the
contractor was to "Die-cut, fold and glue extension on
cover 4 to the inside of cover 3 to form a 3" pocket." The
cover was to be saddle-wire stitched to the pamphlet text
materials in 2 places (R4 File, Tab B, page 7) with the
contractor having the option of first putting a stitch in
the text before gathering the text with the cover. (R4
File, Tab B, page 2.) A copy of each of the 3 related
forms was to be inserted in the pocket. (R4 File, tab B,
page 7.) Two of the forms (items 2 & 3) were first to be
folded "from 8 1/2 x 11" to 3 11/16 x 8 1/2" with 2
parallel wraparound folds." The other form, item 4, was to
be 8 x 10 1/2" in size and inserted unfolded. (R4 File,
Tab B, pages 3 and 7.) Two fully completed advance sample
copies of the pamphlet were to be furnished to Respondent
for "final approval" prior to Appellant's binding of the
entire production quantity. (R4 File, Tab b, page 7.)
(The Product Quality for both printing and finishing
attributes was to be equal to the Level I standards for
such attributes as set forth in the GPO Quality Assurance
Through Attributes Program (QATAP, GPO Pub. 310.1 revised
June 1981)). The QATAP itself was made a part of the
contract by reference thereto in the first paragraph of the
specifications. (R4 File, Tab B, page 1.)
During the course of performance, Appellant furnished
Respondent the required advance of binding samples. These
were in turn inspected on August 4, 1986, by NSWC's Bob
Coleman and Wanda J. Ohm, who found that the cover fold was
askew from the text and needed to be corrected, but that
subject to the correction of the cover, the product was
"O.K.". (R4 File, Tab E.) In recognition of this finding,
the CO made a notation on his official job schedule that it
was "OK to bind" and that the corrections were "minor"
"AA's," i.e., author's alterations rather than contractor's
errors. He also noted that the contractor's representative
"Lorrie" was notified 8/5 at 8:30 a.m., and that the samples
were express mailed to Appellant on 8/5/86. (R4 File, Tab
E.)
At this time, the "ship complete" date was automatically
adjusted to August 12, 1986, pursuant to the contract terms
because of these and other delays. (R4 File, Tab E, page
10.) However, on August 7th, the CO apparently agreed to a
further adjustment to August 28, 1986, because the delays
had forced the Appellant to miss its schedule for die-
cutting and binding. This change was accomplished by
Contract Modification 2420 dated August 11, 1986. (R4 File,
Tab E, page 14.) Thereafter, by letter dated August 28,
1986, the CO requested that Appellant "show cause" why the
completed product had not been shipped. In response the
Appellant, by letter of September 5, 1986, indicated the
ship date had been extended by NSWC through September 5,
1986, due to modifications which were still being initiated
at the time of the show cause letter. Appellant further
stated that the product would be shipped that date, as it in
fact was. (R4 File, Tab E, page 16.)
Contract Modification 2443 of September 4, 1986,
effectuating this last change in pertinent part reflects
that:
[T]he trim size is changed from 8 1/2 x ll" to 8 1/2 x l0-15/16"
with the intent to create the appearance of a more square image
on the covers. This change is made after the printing of the
text and covers.
. . . .
This change, as agreed, shall result in no additional cost
to the government.
(R4 File, Tab E, page 15.)
On September 12, 1986, Judith Walter, Printing Specialist,
Naval Printing and Publications Service, Naval District of
Washington (NPPSO-NDW), advised Respondent that shipment had
been received by NSWC and that the 13 copies of the pamphlet
which she enclosed, selected randomly, one from each of 13
boxes, represented an unsatisfactory Level I printing job.
Accordingly, the NSWC was rejecting the job for the
following reasons:
a. When the brochure is closed, the cover is larger than the
text pages by 1/32" to 3/32" on the vertical edge.
b. The bottom of the back cover is not flush with the bottom
edge of the other pages; the bottom edge is approximately
1/16" off.
c. Many covers are marred; the gray ink did not dry before
packing or the covers were scuffed in packing.
d. The spot varnishing of some of the text photographs is
out of register.
R4 File, Tab F.
Walter further advised that notwithstanding the errors, NSWC
would keep and pay for 1,000 copies of the pamphlet in order
to get through the initial stages of their recruiting season
which had already begun. She requested a reprint of the
remainder of the order "except for the items stuffed in the
back pocket, these can be used for the reprinted job." (R4
File, Tab F, supra).An examination of the samples completed
by Christine C. Ridge, Quality Inspection Technician,
Quality Assurance Section, GPO, on September 10, 1986,
confirmed 10 major defects in attribute P-2 because of
extraneous marks (scratches). Ridge recommended rejection
and reprinting of the product. (R4 File, Tab G.) On her
inspection report Ridge noted the lot size as 15,165, random
sample size as 32, but that only 13 samples had been
received.
Thereafter, by letter dated October 15, 1986, the CO advised
the Appellant of the rejection because of the P-2 defect,
and that approximately 500 copies of the order would require
reprinting at no additional cost to the Government. (R4
File, Tab H.) Appellant picked up and examined the entire
order, corrected the noted defects, and redelivered the
pamphlets by October 20, as directed.
However, on October 27, 1986, Walter again sent a "Notice of
Quality Defects" to Respondent. This time the Notice
advised that the brochures had the following defects:
"Trim: wrong size/not flush/not square; Excess glue;
Damaged cover - cuts/scratches," and that "[s]ome brochures
are water damaged; in some, the pages are stuck together;
and some have been unsatisfactority [sic] stapled, i.e.,
stapes [sic] are broken or not completely closed." She
further stated that "[q]uality does not meet specifications
and the material can not be utilized. It
is requested that the entire order be reprinted or corrected."
(R4 File, Tab I.)
Appellant's Billing and Contracts coordinator, Melinda L.
Peck, telephonically contacted by Ridge on October 31, 1986,
and told of the Navy Department complaint. Peck purportedly
said that she was afraid that the Navy would say something
about the staples but could not understand the claim of
water damage since Appellant's plant had not been affected
by a recent flood in their area which apparently was widely
publicized. Ridge acknowledged in her notes of the
conversation that she, herself, saw no water damage in the
samples but only "some wrinkles due to the shrink wrap being
to [sic] tight." (R4 File, Tab J, Notes 10/31/86.)
An extensive inquiry, including checks with the
transportation company and personal inspection by Ridge
resulted in an entry by Ridge in her notes dated December
16, 1986, that in her opinion there was no "water damage at
all. What they thought was water damage are some wrinkles
in the text caused by the shrink wrap . . . ." (R4 File,
Tab J.)
Ridge informed Darwin Hughes, Respondent's Chief of Quality
Control, of her findings. Hughes and Ridge then
telephonically spoke to NSWC's Ohm. Ridge reported in her
notes that:
Wanda mentioned that after the shipment went back to the
contractor she heard on the news that Tulsa, OK was flooded
and thought about her books being there in the flood. The
gentleman that was with Wanda mentioned that this is not
what he considers to be quality level I printing
by comm'l standards and pointed out that the staples look bad
because the contractor did not staple through the same holes in
the text, when the new covers were put on. He also pointed out
what they were talking about "[V]arnish out of register." I told
them that the varnish is off a little but not enough for a Q.L.I.
per the QTAP. Wanda said that she is more upset over the covers
not being even with the text than the other things and that they
don't feel that they got a good Q.L.I. product for the $36,000.00
they paid for this job.
R4 File, Tab J, Notes 12/16/86.
As a result of the conversation, Hughes directed Ridge to
pull an additional sample of 125 pamphlets. According to
Ridge's notes of that conversation, an examination of "some"
of these additional samples by Quality Control's Jerry
Flemion that afternoon (12-17-86) revealed that "the
halftones, Register [sic] and printing are all good and are
acceptable to the government but the text is 1/8" different
in size from the cover." (R4 File, Tab J, Notes 12/17/86.)
Ridge next noted that she "got opinion of three professional
bookbinders, Robert Denisac, Tim Gallagher, and Ray McCrae,
they feel that this job would be hard to do any better."
(R4 File, Tab J, Notes 12/18/86.)
On December 19th, Ridge and Hughes spoke to two more of
Respondent's bookbinding experts, Frank Grimes and John
Crawford. Ridge's notes of those conversations paraphrase
Grimes as saying:
1. Not a Q.L.I. job due to overhanging cover.
2. but he's got a decent looking job
3. would rather have it overcut than undercut.
and Crawford as saying:
1. not a Q.L.I job
2. could have done a little better job
3. Text is under cut
4. Pocket creates a problem
5. Hard cover to do with squars [sic].
6. "Bastard of a cover.
That same day, the following information was given to the
Navy Department by Respondent's representative:
1. job is rejectable.
2. some overhang of covers due to text under cut.
3. There are problems with using this type of cover, if reprinted
there should be a slight improvement but don't expect more than
that.
4. We advise a discount.
5. . . . .
R4 File, Tab J, Notes 12/19/86
There followed various conversations between Respondent's
and Navy's personnel respecting the recommended discount.
On January 8, 1987, the Navy advised that it would accept a
25 percent discount. (R4 File, Tab J, Notes 1/8/87.)
However, the following day it put this decision on hold.
(R4 File, Tab J, Notes 1/9/87.) Subsequently, on January
12, 1987, it rescinded the discount decision and asked for a
complete reprint. (R4 File, Tab J, Notes 1/12/87.)
As a result of Navy's changed position, GPO procurement
personnel held a meeting among themselves on January 13,
1987. Ridge's notes of that meeting reflect that Hughes
opined that humidity and not water caused the purported
"water damage"; that the uneven cover was the result of a
poor design, and that "anyone who would design a cover like
this is an idiot. There
are no printing problems with the cover. The cover has to be put
on separately after the text is printed. The printing inside is
OK. . . . . No one can do a better job." The notes also
reflect that Flood, the CO, said that the pamphlet is a usable
product and that the people with whom the procurement personnel
were dealing obviously didn't know anything about printing, and
that it is was up to the procurement personnel to persuade the
Navy to take a discount. Daniel Clurman, Chief, Contract
Management Branch, then opined that the Navy Department "has the
last word, . . . if they want a reprint that's what they should
get." Hughes then said that if Respondent "made the contractor
reprint the third time there's no guaranty they'll get any better
of a product, this design makes it difficult for any QLI
contractor to do a better job." Clurman then said that
Respondent should give Appellant written notice of the problems
which had been found. (R4 File, Tab J, Notes 1/13/87.)
Accordingly, the following letter was sent to Appellant by
Hughes that same day:
A quality evaluation was made of this product you corrected
and delivered on October 16, 1986.
From the first inspection the product was found to have
scratches on some of the covers of which you corrected 500
copies out of 14,165 and delivered on October 16, 1986.
Our second inspection revealed defects under the following
attributes:
Contract Terms No. 1, 2-10 Quality (stitching)
P-2: Extraneous Marks
P-7: Type Quality and Uniformity
F-1: Trim Size (text undertrimmed)
F-7: Excess Glue
F-8: Damaged Pages
This is to inform you of these defects, notifying you that
this product is rejectable. We are currently negotiating
with the agency to resolve this matter, you will be notified
as soon as a decision is reached.
R4 File, Tab J.
Ridge next noted in her file that a meeting was held with
the Navy on January 20, 1987. In the meeting Hughes
reportedly reaffirmed his belief that "it was not water
damage and that the varnish is not off register far enough
to be concerned about, but the glue problem will be
corrected. There will be problems in reprinting the cover
because the cover must be prepared separterly [sic] and the
cover has to be a little oversize with some skewness due to
the pocket on the back." Clurman said that Respondent went
to its bindery department and discussed the product with
them, and that "our chances of this job coming out any
better is slight." (R4 File, Tab J, Notes 1/20/87.)
Flood then told the Navy personnel that "we want you to take
the 25% discount because the average lay man will not notice
anything wrong with the folder." Navy personnel Coleman and
Ohm responded by saying that while they were conducting
their inspection at Appellant's plant (GPO's) "John Bassett
said that the overall printing was not good." Flood
responded by saying "[T]hat's funny John Bassett told [me]
that the [contractor] did
a fantastic job." Coleman and Ohm then alleged that "this job
started out wrong because they ordered wrong inferior grade of
paper." Nevertheless, after some further discussion, a decision
was reached to ask Appellant to reprint the job a second time.
(R4 File, Tab J, Notes 1/20/87.)
Accordingly, on January 27, 1987, Ridge called Peck and
explained the defects. Peck agreed to reprint but was
unsure of scheduling because of the need to obtain the
required paper. (R4 File, Tab J, Notes 1/27/87.) The
following day, January 28, 1987, Peck advised Ridge that she
was "sending Ridge a letter with a xerox copy of a note
signed by Coleman and Wanda Ohm." She explained that "a
pamphlet with a pocket normally has about 8 pages, this one
has 32 pages and when the cover is closed with the pocket on
the cover lookes [sic] skewed due to the amount of pages in
the pamplet [sic] & the pocket." (R4 File, Tab J, Notes
1/28/87.)
By letter dated January 29, 1987, Peck transmitted a copy of
Coleman's and Adams' August 4, 1986, note, supra, at 10.
The transmittal letter in pertinent part stated:
As per our phone conversation, enclosed is a copy of the
inside cover of a book returned back to us in August 1986,
which had been an advance copy sent to the agency for
approval.
It states cover fold was askew from text, but the cover was
not the problem. The pocket makes the cover thicker at the
lower right which causes the text at the bottem [sic] to
push out more than the top of the book. You can see the
text sticks out beyond the cover by about 1/8 on [sic] an
inch. In order for us to repair it, we had to trim the face
l/8" under size in order to comply with the instructions of
Bob Coleman and Wanda Ohm without redesigning the cover.
This was the only way to correct the problem and the note
said after correcting it was okay to process.
Reprinting this job at 8 1/2" would not provide a different
result unless the pocket was redesigned to be further away
from the spine. Without a design change the text will again
push out into an over hang position on the face. I hope
this clarifies the note written.
ColorGraphics proceeded only after press checks, binding
sample okays, and followed the instructions of the end user,
we feel reprint without design changes would not alter the
results.
Kindly advise us of your thoughts.
R4 File, Tab J.
On January 30, 1987, Peck advised Ridge that Appellant would
"fight not to reprint."
On February 2, 1987, the CO issued the following letter to
Appellant:
An examination of samples of the product your firm produced
for Department of the Navy has revealed defects under the
following attributes:
Contract Terms No. 1, 2-10 Quality (stitching)
P-2: Extraneous Marks
P-7: Type Quality and Uniformity
F-1: Trim Size (text undertrimmed)
F-7: Excess Glue
F-8: Damaged Pages
Based on the results of this inspection, the order has been
determined rejectable, and will require reprinting. The
reprinting will be accomplished at no additional cost to the
Government in strict accordance with the specifications.
As agreed, the rejected copies will be picked up on February
3, 1987.
As mutually agreed upon in our telephone conversation of
February 2, 1987, the reprinting and delivery of this
product will be accomplished by March 25, 1987.
R4 File, Tab K.
On February 12, 1987, during production of the second
reprint, Peck asked Ridge to advise her as to "what size
exactly" were "the text and the cover to be." Later that
day Hughes, at Ridge's request, informed Peck that the text
was "to be 8 1/2 x 10 15/16 and the cover to be flush with
the text at 8 1/2 x 10 15/16 but if the cover needs to be
changed due to walking, that the cover size can be changed
but the text and cover still must be flush . . . the job
must be cut and folded on a bias. Cover over 1/32-text not
under." Hughes also suggested to Peck that she check with
Appellant's "pros in the bindry [sic] to see what they will
need to do to get what we want . . . maybe they could change
the design of the pocket, like not having a fold over to be
glued close to the bind . . ." Hughes asked Peck for
Appellant's suggestions on how to redesign the cover because
Peck "kept saying that to get what the agency wants the
cover needs to be redesigned." (R4 File, Tab L, Notes
2/12/87.)
Various telephone conversations between Appellant's
personnel, including its President, Robert Diehl, and
Respondent's personnel followed. Ridge's notes of
conversations between Hughes, Diehl, and herself for
February 19, 1987, reflect that they told Diehl "that he
must maintain text 1/32" from the cover; that Respondent had
had a meeting with the Navy and addressed the defects . . .
we even ask [sic] for a discount. We
got their complaints all out in the open but we are dealing with
an impossible artist and designer. The art display is extremely
difficult. . . . . Used glue tape instead of glue. [Diehl]
suggested that the pocket be made smaller 8 1/8 x 3 instead of 8
3/8 x 3 to get the pocket out of the gutter . . ." (R4 File, Tab
L, Notes 2/19/87.)
When the Navy Department was contacted for its approval of
these changes, it would not concur with the change in the
size of the pocket. (R4 File, Tab L, Notes of 2/24/87.)
By letter of the CO dated March 5, 1987, Diehl was informed
of Navy's response. Diehl was also advised of the following
pertinent prerequisites respecting the second reprint:
5) Maintain cover and text preferably flush but undercut
text acceptable no more than 1/32" for face trim, and no
more than 1/64" top and bottom trim. Revert back to the
original trim size of 8-1/2 x 11 and disregard the
supplemental agreement dated September 4, 1986, Modification
#2443.
6) Use glue strip tape for pocket on cover 3
7) Apply a dry varnish instead of a wet varnish on cover 1 &
4
8) Try to retain a humidity level sufficient to prevent any
warpage
9) Watch type quality (doubling) within text
. . . .
R4 File, Tab L, page 11.
On March 9, 1987, Diehl contacted the CO advising that
Appellant was going to press that week. Diehl renewed his
request to reduce the pocket size ("even 1/8" will help"). This
time the Navy gave its approval making the pocket size 8 1/4 x 3
instead of 8 3/8 x 3 inches. (R4 File, Tab L, page 14.)
The job then went into production. In this phase, during
the bindery inspection, Respondent's representative
telephonically told Navy's representative (Coleman) that
"most of the job is right on the edge (flush) but some are
off a hair over the cover down at the bottom besides the
pocket." Coleman told Respondent's representative "to go
ahead with the job, they [Navy] will take it."
Subsequently, Contract Modification 818 dated March 24,
1987, was issued by the CO on April 8, 1987, and agreed to
by Diehl on April 10, 1987. The agreement incorporating
various aspects of the previous negotiations of the parties
reported, supra, in pertinent part stated:
Covers (Item 1): Coat (after printing) the entire surface
of covers 1-4 with a dry gloss varnish or lacquer to prevent
scratching and smearing. Additionally, (page 5 of 8,
paragraph 6) are amended to read: "Binding: (Item l)
Cover: Die-cut, fold and glue using a glue strip tape
extension on cover 4 to the inside of cover 3 to form a
pocket 8-1/4 x 3". Saddle-wire stitch cover and text in 2
places.
The contractor is to maintain cover and text preferably
flush but undercut text acceptable no more than 1/32" for
face trim, and no more than 1/64" top and bottom trim.
Revert back to the original trim size of 8-1/2 x 11" and
disregard the supplemental agreement dated September 4,
1986, Modification #2443.
These changes shall result with no increase to the contract
price.
R4 File, Tab L, page 16.
By letter dated May 29, 1987, Appellant advised the CO that
it had completed the second reprint pursuant to Respondent's
instructions, that the Appellant incurred costs in excess of
$30,000 in order to comply with the instruction, that the
reprint was unjustified in Appellant's opinion, and placed
an undue hardship under Appellant, and that a contract
modification therefore should be issued authorizing
Appellant to be paid for the reprint. Appellant requested
the CO's decision on this request pursuant to the disputes
article, Part 2, Article 2-3 of U.S. Government Printing
Office Contract Terms No. 1. (R4 File, Tab M.)
In response, the CO, by letter dated June 11, 1987, styled a
"final decision," denied the appeal. (R4 File, Tab N.)
Appellant then filed its Notice of Appeal with this Board
(R4 File, Tab O), followed by its Complaint which in
pertinent part, as its claim for relief, states:
11. Colorgraphics attempted in good faith to perform its
obligations under the GPO Purchase Order and the GPO
Contract Terms. When the order was first shipped and
Colorgraphics was advised of extraneous marks on the
Pamphlet covers, Colorgraphics accepted the return of the
Pamphlets and replaced those which had been scratched at its
own cost including the cost of the return shipment to Tulsa
and reshipment to the Purchasing Agency. Colorgraphics was
not advised of any deficiencies or defects in the text of
the Pamphlet during that period.
12. The erroneous report by the Purchasing Agency to GPO
and to Colorgraphics that the order had suffered "water
damage" during the October, 1986 reshipment caused extensive
delay, confusion and cost to Colorgraphics in making its
good faith effort to determine the cause and extent of the
reported "water damage."
Only after the "water damage" report was found to be in error was
Colorgraphics advised by letter dated January 13, 1987, of
defects found in a "second inspection".
13. None of the defects referred to in the GPO letter dated
January 13, 1987 pertaining to stitching, extraneous marks,
type quality and uniformity, excess glue and damaged pages
were sufficient to justify the rejection of the work nor
were they of a nature to prevent the use of the Pamphlets
for their intended purpose.
14. The problems with the trim size of the cover and the
skewing of the text were caused by the design of the
Pamphlet produced by the Purchasing Agency. The job
specifications required that the cover fold for the inside
pocket be 8-3/8" wide, which forced the inside edge of the
pocket into the gutter of the cover thereby distorting the
squareness of the cover. The 32 pages of text could not be
inserted and bound over the thickness and width of the
pocket without skewing the text and causing the difficulties
in meeting the specifications for face, top and bottom trim.
The specification that the pocket on the inside of the back
cover be 8-3/8 x 3" was not necessary for the pocket to
function as intended. The GPO staff acknowledged in their
review of the product that the design of the cover was the
cause of the trim and skewing problems. The Purchasing
Agency and the GPO acknowledged the difficulties in
production caused by the design of the cover and the
thickness of the text and finally approved a reduction of
1/8" in the width of the pocket and modifications in the
face, top and bottom trim specifications as set forth in the
March 24, 1987 Contract Modification by the Contracting
Officer.
15. The rejection of the job by the Purchasing Agency was
unreasonable and without due regard to the opinions and
evaluations provided by the professional printers and
binders on the GPO staff.
16. An equitable reduction in the contract price would have
adequately protected the interests of the GPO and the
Purchasing Agency and would have avoided the harshness of
the economic penalty imposed upon Colorgraphics by the
rejection of the entire order and the requirement for
reprinting.
Official File, Tab 5.
Appellant's prayer for relief is for the issuance of a
contract modification in the amount of $35,596.46 as the
actual and direct costs incurred by Appellant in reprinting
and reshipping the pamphlets.
A general denial of Appellant's allegations was entered in
the record on behalf of the Respondent pursuant to Rule
6.(b) of The Rules of Practice and Procedure of this Board,
GPO Instruction 110.12 dated September 17, 1984.
Appellant elected a formal hearing pursuant to Rule 8.
Accordingly, a prehearing telephone conference was held on
February 22, 1988, to discuss preliminary matters. At that
time Appellant's counsel requested documentation of the
factual basis underlying the Contracting Officer's rejection
letter of February 2, 1987. (R4 File, Tab K.) Respondent's
representative stated that he could not then locate the
documentation but would attempt to locate it after the
conference and if found, furnish it to the Board and
Appellant. With that agreed to, Appellant's counsel advised
that no further hearing would be necessary and the matter
could be decided upon the written record, provided it could
be determined that certain GPO employees identified, supra,
were accurately quoted in the R4 File. Respondent's
representatives agreed to this arrangement. The parties
also requested that they be allowed to file cross and reply
briefs on the issues presented. The Board agreed.
As a result of the Prehearing Conference held February 22,
1988, Respondent supplemented the record on February 23,
1988,
with an inspection report by Ridge dated December 16, 1986, as
the underlying documentation for the CO's February 2, 1987,
rejection letter. The report in pertinent part stated:
Defect Breakdown by Attributes
Defect Class
_______________________________ Major Critical
Contract Terms No. 1, 2-10 Quality 19
(Stitching)
P-2 Extraneous Marks (scratches on cover) 2
P-7 Type Quality and Uniformity (Doubling) 12
F-1 Trim size (text undertrimmed) 102
F-7 Excess Glue 15
F-8 Damaged Pages (Humidity) 2
TOTALS 152
Number of Defects/100 Items
AQL
(No. Majors + No. Criticals divided by Sample Size) 100
6.5
Number of Critical Defects/100 Items
(No. Criticals divided by Sample Size) 100
1
Accept x Accept with Discount 25 % Reject and
Reprint ___
R4 File, Tab P.
Subsequently, by Joint Stipulations received by the Board on
April 12, 1988, the parties indicated that Messrs. Clurman,
Crawford, Denisac, Flood, Gallagher, Grimes, Hughes, and
McCrae had reviewed the comments respectively attributed to
each of them in the notes contained in Tab J (See page 13,
supra.), and that each agreed he was accurately quoted.
Additionally, Respondent agreed to stipulate that Jerry
Flemion, a former employee, would testify to the accuracy of
the quote that "the text is 1/8"
different in size 20 from the cover." attributed to him as "Jerry
F." in Ridge's notes of December 4, 1986.
Cross and reply briefs were duly filed with the Board and
the record thereafter settled on June 6, 1988.
The appeal now comes to the Board in this form for decision.
ISSUE
The issue presented by this appeal is whether or not
Appellant under a theory of implied Government warranty of
the adequacy of the specifications is entitled to a
modification of the contract price for the actual and direct
costs incurred by it in printing and reshipping the
pamphlets. The resolve of this issue turns upon:
(1) Whether there was such a warranty respecting the pamphlet's
design;
(2) Whether Appellant followed the design to the letter;
(3) Whether the skewness of the pamphlet cover was caused by the
defect; and if so,
(4) Whether the defects other than trim size reflected in the
inspection report of December 16, 1986, can be relied upon by
Appellant to support the rejection; and if so,
(5) Whether rejection was in fact based upon such other defects.
FINDINGS OF FACT AND CONCLUSION OF LAW
Examining the stated issue and questions in light of the
record and applicable Government contract law, the Board
finds that:
(1) There was an implied warranty of the accuracy of the
specifications with respect to the design of the pamphlet,
including its pocket. In Consolidated Diesel Electric Corp.,
ASBCA 10486, 67-2 BCA ¶ 6669 (1967) at 30,951-52, the Armed
Services Board of Contract Appeals stated:
The Government's implied warranty of the adequacy of its
specifications is based on its responsibility for the
specifications rather than any presumed 'superior knowledge'
in the sense of greater expertise. When one of the parties
to a contract undertakes to prepare the specifications, that
party is responsible for the correctness, adequacy and
feasibility of the specifications, and the other party is
under no obligation to check and verify the work product of
the party who assumed responsibility for the preparation of
the specifications, even though he may be as much or more of
an expert than the party who prepared the specifications.
Courts have held many times that a bidder need not verify
the correctness and adequacy of Government specifications
prior to bidding. Ithaca Gun Co. v. United States, 176
Ct.Cl. 477 (1966), Harvey-Whipple, Inc. v. United States,
169 Ct. Cl. 689 (1965.)
However, before applying the implied warranty of
specifications it must be determined whether the problem
encountered is caused by an improper Government design. In
this regard, the boards and courts often refer to the
specifications as design specifications when the Government
has dictated the details of performance and as performance
specifications when the details are left to the contractor's
discretion. In Monitor
Plastics Co., ASBCA 14447, 72-2 BCA ¶ 9626 (1972) the Armed
Services Board at 44,970-71 stated:
DESIGN specifications which set forth precise measurements,
tolerances, materials, in process and finished product tests,
quality control, inspection requirements, and other specific
information. Under this type specification, the Government is
responsible for design and related omissions, errors, and
deficiencies in the specifications and drawings. PERFORMANCE
specifications set forth operational characteristics desired for
the item. In such specifications design, measurements and other
specific details are not stated or considered important so long
as the performance requirement is met. Where an item is
purchased by a performance specification, the contractor accepts
general responsibility for design, engineering, and achievement
of the stated performance requirements. The contractor has
general discretion and election as to detail but the work is
subject to the Government's reserved right of final inspection
and approval or rejection.
Turning to the specifications in the instant case, we find
that they detail the exact papers to be used for cover text
and related forms; the size, location, and method of
construction of the inside pocket; the folding and the
insertion of the forms; and the pocket and binding options
available to Appellant with respect to gathering and
stitching the text and affixing the cover thereto. We
conclude from this that the specifications, by their nature,
are "design" specifications rather than "performance"
specifications, thus our finding of warranty.
(2) Appellant executed its production of the pamphlet in
strict accordance with Respondent's design. Appellant has
affirmatively asserted that it followed the specifications
of the pamphlet to the letter and there is no evidence in
the record to
the contrary. On the other hand, there are substantial
admissions against interest by Respondent's technical personnel,
including its Chief of Quality Control, to the effect that a
better job could not be done, from which we impute accuracy to
Appellant's assertion.
(3) The skewness of the pamphlet cover (trim size defect)
was caused by Respondent's design. This conclusion is
supported by the numerous admissions against interest by
Respondent's technical personnel, supra. Moreover, the
pamphlets were satisfactorily manufactured upon the
Government's agreement to modify the specifications in
accordance with Appellant's advice.
(4) Other defects in Ridge's inspection report cannot be
relied upon to support rejection in this case given the
particulars of the Appeal Record cited by Appellant in its
"Reply Brief," which such particulars the Board has examined
and found to be sufficiently contradictory to the inspection
report findings to make them of doubtful accuracy.
(5) There is substantial evidence supporting a conclusion
that the sole underlying basis for the rejection was the
desire of GPO procurement personnel to mollify their
customer agency, and that defects other than trim size were
not the direct cause of rejection.
Accordingly, it is the decision of this Board that the
appeal be granted and the matter remanded back to the CO
for a determination of the quantum of money to which
Appellant is entitled as actual and direct costs incurred
by it in printing and reshipping the pamphlets. Such
determination is to be made in accordance with standard
cost determination procedures, including audit, if
necessary.
REVERSED AND REMANDED.